The Employee Retention Tax Credit (ERTC) can be extremely valuable, worth up to $5,000 per employee in 2020 and up to $21,000 per employee per 2021. A business with just 10 employees that qualifies for the full credit can get up to $260,000 – that’s over a quarter of a million dollars. This number can get substantially higher for businesses that have even more employees.
This is an astonishing amount of money, and it’s a rare opportunity – the government has never offered a credit this generous before. The money isn’t available to every business, but it’s available to a significant portion of them. You need to meet very specific criteria, but if you do, this credit can be a windfall.
You still have time to apply for the ERTC, but you need to be aware of the deadline. There is a limited amount of time to apply for this credit, and if you miss the window, you will never be able to get these funds in the future. This guide is designed to help you out. It looks at the ERTC deadline, outlines what you need to know about claiming the ERTC with ADP, and finally, it summarizes the basic rules and requirements for this credit.
What Is the ERTC Expiration Date?
The last date you can claim the ERTC is December 31, 2021. This is the deadline for recovery start-up businesses. Most businesses can only claim this credit thought June 30, 2021. This actually means, though, that these are the last dates you could have paid the wages that you use to calculate this credit.
The deadline to claim the credit, however, has not yet passed at the time of writing – the deadline to claim the ERTC is three years after the payroll tax return was due. Payroll tax returns are due on the last day of the month following the quarter when you paid wages.
Here’s an example. Say that you paid wages in the second quarter of 2020. Your payroll tax return for this quarter was due on July 31, 2020. That means you have until July 31, 2023, to submit an amended payroll tax return, and that’s what you need to do if you didn’t claim this credit on your original tax return.
Each quarter has a different deadline for the ERTC. The deadlines range from April 31, 2023, to January 31, 2025. Note that this last deadline only applies to recovery start-up businesses that qualify to claim the credit for the final quarter of 2021.
You can also use an alternative ERTC deadline, which is two years from the date you paid the tax. You should choose the latter of the two deadlines when determining which one to use. The two-year deadline generally only applies when you paid the tax significantly later than you filed the return.
ADP ERTC Guides and Resources
You are likely to run into the ERTC section of the ADP website if you’re searching for information about the ERTC. You might have found an ADP ERTC page if you were looking for details about the ERTC deadline, for example. These web pages can be a great resource, but if you want to claim the ERTC, ADP isn’t the best option. Here are some more details about ADP and the ERTC.
What ADP Does
ADP provides cloud-based personnel management solutions to businesses. It offers solutions that help companies to take care of their human resources, payroll, talent, time, and benefits. It is a global company with thousands of clients and offices all over the world.
When Businesses Use ADP
Businesses of all types need tools to help them take care of administrative processes, but it generally doesn’t make sense to use a different kind of software for each need. It is more effective to use a coordinated or integrated solution that meets all of the business’s needs. This is where ADP comes into play.
Why ADP Writes About the ERTC
ADP, like many other businesses, maintains an extensive website that contains information about payroll, HR, talent, time, and benefits. Those are the areas that these company focuses on, as indicated above. ADP posts web pages about these topics because they are interesting to ADP’s clients.
ADP also posts about these topics because they draw in web searchers who may want to purchase ADP’s products. Getting an ADP webpage as a response to your web query doesn’t necessarily mean that this company is the right fit for you. This doesn’t just apply to the ERTC. It can also apply to other types of information.
Say, for example, that you do a web search about payroll. You get an ADP page as your result, but then you realize your small business doesn’t need ADP’s high-powered solutions. You decide to hire a small local company to handle your payroll instead. ADP’s website answered your question about payroll, but you didn’t need the company’s products. This same type of scenario can also come into play when you’re searching for the ERTC.
How ADP Helps with the ERTC
The primary way ADP helps with the ERTC is by posting informative articles. The ERTC ADP articles can be very useful to business owners who have questions about the ERTC. ADP also offers resources for accountants or similar professionals. The company also says it will provide accountants with a commission if they refer clients who want the ERTC to ADP.
ADP doesn’t publish details on how much it charges for posting ERTC requests, but if an accountant referred you to their site, you can almost guarantee that the commission paid to the accountant will be added to your cost. This, however, isn’t necessarily the reason you shouldn’t select ADP to help with your ERTC credit. The real reason you shouldn’t use ADP ERTC services is that you should work with a professional.
ADP has an excellent reputation. It has been in existence for over 70 years and has appeared on many lists of the world’s most admired companies for over 16 years in a row. This company, however, is not the ideal option if you’re trying to get ERTC credit – instead, you should turn to a company that focuses exclusively on this credit.
Overview of the ERTC Deadlines and Rules
You might still wonder if you qualify for the ERTC as well as how it is calculated. This section goes into all of those details. It will help you decide if the ERTC is right for your business.
Definition of the ERTC
The ERTC is a tax credit qualifying employers can get if they paid qualifying wages during the COVID-19 pandemic. The credit covers a certain amount of qualifying wages and can put money in your pocket. Employers initially used the credit to offset their payroll deposits, but now, you can just amend your old payroll tax returns to claim a refund.
Value of the Credit
The value of the ERTC is significant. Qualifying employers can claim this credit on 50% of wages up to $10,000 for 2020. That means the credit can be worth up to $5,000 per employee for 2020. The value is even higher on 2021 wages. The ERTC is 70% of qualifying wages up to $10,000 per quarter. That means it can be worth up to $21,000 per employee annually if you qualify to claim it for three quarters of 2021.
Recovery start-up businesses, as indicated above, can claim this credit for wages paid in the last quarter of 2021, but they can only claim a maximum of $50,000 per quarter. The requirements are slightly different for these businesses – that’s why it’s critical to work with a specialist.
You can qualify for the ERTC in two ways: by experiencing a drop in revenue or by having your operations restricted. The rules also vary based on the period for which you’re claiming the credit. The 2020 ERTC can be claimed if your revenue dropped by at least 50% in any quarter of 2020 compared to the same quarter in 2019.
You can continue to claim the credit every quarter thereafter until your revenue is 80% or more of what it was in the same quarter of the previous year. You need to look at your sales records to figure out these ratios.
The 2021 credit only requires you to have a 20% drop in revenue. You could claim this credit if your revenue was 80% or lower than in the same quarter in 2019. You read that right – you should compare 2021 numbers to 2019 numbers. There is an exception, however. Businesses that weren’t open in 2019 can use their 2020 numbers as a comparison.
You can also qualify if the government shut down your business or suspended some of your operations. Your business generally needed to have at least 10% of its operations suspended for you to qualify in this category. That means that you can qualify if you had to shut your doors completely, but you may also be able to qualify if you could only run parts of your business.
Number of Employees
There are also special ERTC rules for large businesses. The government uses your 2019 employee numbers for this rule. Companies with over 100 full-time employees can only claim 2020 credits if they paid employees who were not working. The 2021 credits are only available to businesses with over 500 full-time employees if they paid their employees when they weren’t working.
Special Rules for New Businesses
New businesses have expanded the qualification criteria for the ERTC. These businesses are called recovery start-up businesses for the purposes of this credit. You must have started your business after February 15, 2020, if you want to qualify as a recovery start-up business. You must also have less than $1 million in revenue on average for the three years before you are claiming the credit.
Recovery start-up businesses don’t need to have a drop in revenue or a suspension of operations. They can just qualify for this credit based on being a new business. They can also claim the credit for the last quarter of 2021. They are the only businesses that can claim the ERTC for this quarter.
Rules for PPP Loan Recipients
One of the reasons the ERTC is so complicated, and people have to turn to sources such as the ERTC ADP website, is because the credit has been changed so many times. This is largely due to the fact that three separate laws shaped this credit, and they all had different rules.
Businesses initially could not claim this credit if they had received a Paycheck Protection Plan (PPP) Loan. The final law that affected the ERTC, however, changed this rule – you can now qualify for the ERTC even if you got a PPP loan. You just can’t claim the ERTC against the wages you paid with your PPP loan.
Businesses can qualify for this credit in all kinds of ways, as you can see. The important thing is to ensure you meet the ERTC deadlines. Missing these deadlines will make it impossible to claim this credit.
Get the Help You Need from ERC Today
ERC Today focuses on the ERTC. We don’t make fancy software or business solutions. We spend all day, every day, helping our clients obtain this credit. This credit is complicated, and it’s not something that most accountants, bookkeepers, or even companies like ADP have dealt with in the past. That’s why it’s critical to work with a specialist to optimize this credit’s potential.
We would love to help you get the ERTC. You still have time to claim this credit and put extra money in your pocket before the ERTC deadline. You can get started today – simply begin the online application today or contact us directly.